12/27/2013

SoftBank's T-Mobile acquisition deal expected in spring

SoftBank, the Japanese owner of third-ranked U.S. wireless carrier Sprint, plans to make an offer for T-Mobile in spring. The two businesses would likely be integrated with Sprint, according to Nikkei.

Rumors of the takeover plan first started circulating earlier this month. SoftBank CEO Masayoshi Son has aggressive plans for the American wireless market; his SoftBank spent more than $20 billion to acquire Sprint in a deal that was closed earlier this year. T-Mobile is the fourth-ranked US wireless carrier; both T-Mobile and Sprint have been in a race to build out 4G LTE networks to keep pace with larger rivals Verizon and AT&T.

Nikkei reports that Deutsche Telekom, T-Mobile US's parent company, is pushing SoftBank to offer cash and other transactions to what was initially envisioned by SoftBank as a stock swap.

Even if SoftBank and Deutsche Telekom put together a deal that works for both parties in principle, it's still subject to regulatory approval. It was only two years ago that the U.S. Federal Communications Commission (FCC) and Department of Justice (DOJ) put the brakes on a merger between T-Mobile and AT&T, citing reduced competition as detrimental to U.S. consumers.

Both Sprint and T-Mobile are far behind their larger rivals when it comes to network buildout and, more importantly, subscriber base - and even the two smaller competitors combined would still fall short of AT&T's subscriber base. So it's entirely possible that the DOJ and FCC might view a merger of the two smaller companies in a different light than the AT&T deal.

For SoftBank, it's all about economy of scale and control of spectrum - adding another 45 million customers gives the company more muscle when negotiating deals with cell phone manufacturers.